tv The David Rubenstein Show Peer to Peer Conversations Bloomberg December 10, 2016 1:00pm-1:31pm EST
♪ david: we are starting just like this? lloyd: i don't know. david: when you grew up you do not have a lot of money, was it something you thought about? david: people seem to blame goldman's for more of the sins of wall street more than they blamed anything else. could this be life-threatening? lloyd: it is life-threatening for sure. david: do you think maybe i should step down from ceo and smell the flowers little bit more? >> would you fix your tie, please? david: people would not recognize me if i fixed my tie. i will just leave it this way. alright.
♪ i don't consider myself a journalist. nobody else would consider myself a journalist. i began to take on the life of being an interviewer even though i have a day job of running a private equity firm. how do you define leadership? what is it that makes somebody tick? we are here with lloyd blankfein, who has been the chairman and ceo of goldman sachs for 10 years and i do not think any of your predecessors in the last two decades stayed that long, is that right? lloyd: it seemed that way but it was not that long. david: let's talk about your early life. you grew up in new york city and when you were growing up you did not have a lot of money. was money anything you thought about when you were growing up? did you want to have a lot of money.
what were you interested in? lloyd: i went to school with kids that were like us. i didn't know what the range of possibilities were, i didn't know that we were not well-to-do. david: you grew up in brooklyn? your father worked as my father did in the post office. mine worked in baltimore and yours was in new york, but their job was to file the mail, not to deliver it, sort the mail. you were not wealthy and you went through public schools. you obviously did pretty well because you were valedictorian. you always realized you were probably smarter than the average student. lloyd: i knew ranking high in my school meant i was good at school, but it did not know how smart i was. by the way, being good at school and being smart are two different things. david: were you surprised you got into harvard?
lloyd: my parents did not go to college, but i have one older sibling that didn't go to college either. it would not have applied to me too -- occurred to me to apply to that fancy school. i knew i would go to college, but i assumed -- i remember reading kids went to prep school and i didn't know what that was. it wasn't like i had expectations, i knew no other kid from thomas jefferson high school went to ivy league, but somehow there was a guy from harvard there who spoke to me and encouraged me to apply and the school waived the application fees. i was not that spectacular, it was not like i had perfect board scores or everything. i do not know what made them want to invest but they did. i got there and i was grateful. david: when you got there did you say these kids are smarter than me or not as smart?
lloyd: i had to get over the idea that this was a different planet. the first thing i did and my parents took me to something called the mail shop in brooklyn where they bought me -- it must have been $40, three sports jackets, five pairs of slacks, burnt orange, with a light blue double-breasted jacket. i would not say that i fit the demographic, but when i got to harvard, circa 1971, i am sure my roommates from new england prep school community looked at me like i was from some foreign planet. i can tell that look. i was nuanced enough to tell that they were looking at me like i was some different species. david: were you an athlete or scholar? lloyd: i was a swimmer in high school, i could never have been good in college. even if i was good in high school in new york city.
i went there and try to do that, i was not going to be any good david: you did not try out for the swimming team? i heard you say you are still swimming. lloyd: i did, i was not built for speed, the other kid who started with me were out showered and went to class. i do not think i even dried off, i went from there to the boathouse to try another sport. david: when did you decide you want to go to law school? lloyd: i was 16. by the time i sorted things out, i was premed for a while and i took science courses and i wasn't sure what i was going to do. i toyed with being an academic and i was a good student, not that good a student. it also dawned on me at some point that i needed to pay my student loans and earn a living so i thought it would be a professional. i applied to law school and i walked down the block and went to law school.
david: you went to new york law firms right afterward? lloyd: i got job offers from some. david: you wound up at donovan leisure? lloyd: there was another firm that hired me first and i accepted a job, this is a top notch new york law firm and their tax department, i got a call from them and some months had gone by and they told me, they said we will move you, we have over hired and we will move you to the corporate department. i said, i want to be a tax lawyer. they say we have overhired and we do not have a slot. tell me, how many slots do you have and they said four. i said how many people did you hire for tax? they said five. so i said let me get this straight, i am fifth on the list of four people for this job. we do not look at it that way. i said, i can't come and work
for you. there was another firm that had i signed up with -- i got thrown on to some very interesting cases involving the entertainment industry. i moved for two years out to california. i lived in los angeles -- david: were you wearing leisure suits? lloyd: no, everyone else was wearing loincloths and togas and i was stepping over them in a three-piece suit him away to the office. i realized i was out of sync for the lifestyle in california. david: i practice law as well, i was not a good lawyer. my client made that clear. your clients thougth you are good at it. what made you think you wanted to leave? lloyd: my friends were going to finance jobs and at that point it was not the be-all end-all. the job i took eventually paid less money than what i was
making at that point as a fifth-year associate in a law firm. i applied to a few more firms and did not know a lot about them, but i had a job interview at morgan stanley, dean witter was a separate firm, goldman sachs was one of them. i got turned down by all of them and probably for good reason. a lot of people -- there was no reason to grab onto me. it was a separate company and managed separately and eventually as a result of joining j. aron i started getting integrated into goldman sachs. david: have you met the person who turned you down? lloyd: i knew who it was. david: is that person still here? lloyd: this is several years ago. it took me a while to work my way up the letterhead.
david: you wound up as the vice chair of goldman sachs. lloyd: it was not so quick. i got more involved in the equity business and sales and trading and over time i became a vice chairman of the firm, one of several, but my particular coverage was over all of the sales and trading businesses at the time. david: the trading business is where you can lose a lot of
money quickly. i assume you are worried about people under you making a mistake. lloyd: it was good training for the job i am in now. i spent 99% of my time worrying about the 1% of things that could go wrong. it leveraged two things that are normally not virtues, but are in this context. it leveraged my add and paranoia. david: when you became vice-chairman you were under hank paulson, who was the ceo. he seemed to like it and then -- said he would never go to the government and then george w. bush persuaded him to become secretary of the treasury. when he came back with a meeting with george bush, what did he say to you and did you feel like you were ready to be the ceo of goldman sachs? lloyd: i never felt like i was ready to be the ceo. i have been the ceo for 10 years and i am still not sure i'm ready to be the ceo of goldman sachs. there was a conversation, we kind of knew he was being asked to do that job. he came back and talked to me. i wasn't hyperventilating to be
the ceo. i was comfortable with my job and liked my place. i reported to people in my contemporaries in the firm for a long time. i did not necessarily think i was going to keep rising and quirky things happened that made room for me. he told me he was offered this position and he planned to stay in the firm. there was still a possibility that when he did the math, i would still be young enough. it is not like i am waiting for you to leave your table at the buffet and take your seat. it was fine. but notwithstanding him saying that, i guess he got another call and decided to take the job. no big surprise to me. david: you became the ceo. lloyd: i got the call over the weekend. hank is an intense guy, works seven days a week, 24 hours a day. i did too.
i had to go down to washington, there would be an announcement of the day after memorial day in the rose garden and it want you to fly down with me so i could discuss the transition. president bush: i am pleased to announce i will nominate henry paulson to be the secretary of the treasury. lloyd: i was thinking i need to discuss the transition to me. in his mind he was discussing his transition to his next job, so i kept waiting to hear from him where the keys were buried in all we were talking about was his transition. his head was in another place, and it should've been. david: he took the job, you got the job, and the u.s. economy went south. it is fair to say. we went into the great recession. so when did you realize the u.s. economy was heading further south than anyone had thought it possibly could? lloyd: we were worried about the risk profile of the institution, what was going on at to tell you the truth, in hindsight,
everybody knows everything and everybody remembers having known everything. in reality, every day that something was happening it was an incremental thing happening. david: you and the other ceos of major wall street banks were called down to hank paulson's office as secretary of treasury and he said we have a problem and i will make you pay $25 billion or $50 billion to shore up your balance sheet. was that something you wanted to do? lloyd: it would be hard to remember. i think i am pretty good at it. being a trading manager always evaluating people's performance and trying to separate yourself from what you know the person who made the decision couldn't have known, otherwise you are a second guesser. i remembered what i was thinking. i remember thinking at the time that this would make things safer and i had an element of relief about it. because it was going to stabilize things. was there a level of risk out there that i would have been
comfortable? we spent money in our personal lives to ensure ourselves against very remote risks. it was more than a remote risk at that point. not a certainty, but certainly a non-remote risk that there would be a domino effect and things would cave in and it would spiral out of control. did we need to have it done? not necessarily. did we eliminate a risk that should not have been born? the answer is yes. the only thing we know is the world did not spin out of control. i will just say as a risk managing kind of person, i can't tell you that it needed to have been done. people were going to sleep at night with much more risk and responsible people should have taken with the global economy. david: people seem to blame goldman for more of the sins of wall street than they blamed anybody else. why do you think that was and do you think it was fair?
lloyd: there was a number of factors. one, you can't escape the first factor which is that we were very involved. obviously for all the advice, no one was asking us for advice on how to manage our public relations. you were just flat-footed. we have been an institutional firm for all our life, we did not have a relationship for the american public. we did not have a consumer business. we became for time a symbol of the mortgage business, we did not originate in mortgages. we bought mortgages from other firms and to an extent if you are buying mortgages from another firm, you're giving them cash to go out and do more mortgages so we are an enabler of behavior. and the accusation was and it was born out by settlements that we agreed to a set of facts that we might not have done the due diligence on mortgages we acquired and sold to other people.
there is behavior in there, so that is one factor. there's also the issue that we managed our risk pretty well in that crisis. there were a lot of firms out there that lost billions of dollars as firms and individuals got wiped out. we obviously did not make money in the crisis, but we did not lose money in the crisis so we came out relatively unscathed and looking like we needed to be punished in other ways. david: goldman has been much more involved in philosophic activities. you have the program, 10,000 women and helping small businesses. is this in response to some of the image issues? lloyd: i would say historically goldman sachs has been very philanthropic throughout our lives. when i became a partner i was taken aside and they say at the end of your life, someone writes an obituary. if there are nine paragraphs, no more than three should talk about goldman sachs. they should have a more diverse life. like public service.
i would say in general we never publicized what we did anywhere. you never saw goldman sachs commercials or even our name on our building. after the crisis we realized one of the things we needed to do is we did not communicate enough with the public to let them know who we were and what our contribution was to society that was not an emphasis to say, we are entrepreneurial. we have never not been philanthropic. david: you have been involved in a number of philanthropic things yourself. in terms of public service would you ever go into the government and follow your predecessor as secretary of treasurer or something like that. lloyd: i have been asked that question and without hesitation, i would like to be wanted to do that. i would have to think about it. in this environment, i would say you will not argue with me on the point that the invitation is likely to come. david: you never know. lloyd: but you never know.
i am not soliciting it that it would be crazy, other people would say, i would not want to do that. of course you want to make a contribution. david: how do you define leadership and what are the examples you have in your mind of what it takes to be a great leader? lloyd: i think different institutions at different times require different things. i think through the crisis you have to be optimistic but not so much that you lose credibility. you have to be willing to take a punch. you have to have a compass and you have to be -- if not charismatic at least articulate because you have to explain to people and bring them along. you have to get people to behave well. i said in the crisis to people act well now. i said that to my partners because people are going to remember forever how you acted at this critical time. so think about it because we are going to get through this and your reputation will stay with you forever. david: did you go for a second or third opinion just to make sure?
♪ david: about a year or so ago, you were diagnosed with lymphoma. how did you deal with that when you learned treatment was necessary? did you think about stepping back from goldman? lloyd: i started having what in hindsight were symptoms. they were problems that were easily explained. i had a cough, but the end of summer allergies, i thought. i had aches and pains when i exercise, but i never have been this age before. i started to lose weight but i am always trying to lose weight. i thought it was unusually disciplined this time around. when i collected all that stuff and went in to see a doctor. first saw nothing because he didn't think to test me for what i had -- prescribed allergy medicine and etc. and a couple of weeks later when it did not go away i got a cat scan and that lit up like a christmas tree and he called me up and i had lymphoma. david: when a doctor tells you you have lymphoma does he say we
can treat it and there is no big problem, just a matter of treatment or did he say this could be life-threatening? lloyd: it is life-threatening for sure. there are 70 different kinds, hopkins, non-hodgkin's, each one carries its own risk. i had the more aggressive type which is dangerous, more dangerous because if you do not get cured. on the other hand, it is curable. david: you had to go in three or four days for chemo. lloyd: the treatment i had was 6 three week cycles. for three weeks, six times on a cycle basis, the first four and a half days of the cycle, about 98 hours or so, i would be getting chemo night and day continuously. david: did you go for second and third opinion or did you say i'm comfortable with the initial prescription? lloyd: it is funny, you do not know how to react to things until you move through them.
my whole life is about risk management and due diligence. and worry about details and when this happened it was so quick that i knew when i had the cat scan, i knew i had lymphoma but i did not know what type. i had to have a biopsy. which is general surgery and that takes a week to figure out what you have and the way these things work and the peculiarity of being the ceo of a public company was you really cannot tell anybody until you tell everybody and so my wife and i did tell nobody. when i did so during this period of time, including up on the way to the hospital to get the pie -- biopsy, i had a press things scheduled in a televised thing with a lot of reporters in the audience in a did that whole thing on the way to the hospital had a biopsy and waited five days and went to get the results of the report, the thing was
so it advanced and so mandated what the treatment would be i literally went upstairs from the doctor who delivered the results to me right upstairs to strap on the first of the chemo treatments. i did not get a second opinion. david: the treatment has been now been completed. now that you have had this, you are in remission? lloyd: right. david: that means you are always subject to being hurt again. lloyd: i should have been worried before i knew i had a problem. i should have been worried i would get it for the first time and now i am on the edge because i'm worried about getting it for the second time. if i had known better i would worry about getting it the first time. david: when you heard about the prescription -- or the description of what you had and the necessary medication you -- did you think maybe life would be different for me and i should step down as ceo and smell the flowers a bit more or you did not think about that? lloyd: i am very reality-based. maybe i am not that spiritual. i don't know. you are very focused.
i got the news i had lymphoma, got on the telephone and the people said -- how jarring was that? i say it in a kind of funny way to think about, but i am kind of a fatalist in some ways. i said every time i had gotten a physical and the doctor called them is nothing wrong with me, i was shocked. finally, somebody called me up and said something is wrong and i said "par for the course." david: when i first met you, you did not have a beard and now you grew a beard. lloyd: it shaved itself when i had the treatments. it grew back. it is a sign that i have gained. for my wife, it was symbolic to allow the beard to reassert itself. david: when you do leave, what would you like to be your
legacy? lloyd: you are a founder, i am not a founder. goldman sachs was a great firm when i got here and hopefully it will be a great from when i leave. and so what i want to contribute is i want to leave the firm at least as good, but let me be more ambitious. stronger than it was when i found it, more influential, important, but given what we have had to work our way through i would like to leave the firm also viewed as important in the positive influence on american culture and economy. and so we still have a lot of work left to do. ♪
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